Elon Musk’s artificial intelligence start-up xAI has raised $20 billion in new funding in an upsized round that more than doubles its valuation since last spring, underscoring investors’ appetite for AI even as the company faces mounting criticism over the content generated by its technology.
The company, which develops the Grok chatbot and its underlying models, had initially sought $15 billion at a valuation of about $230 billion.
On Tuesday, xAI said the larger round attracted backing from Valor Equity Partners, Fidelity Investment Management, the Qatar Investment Authority and Abu Dhabi’s MGX fund.
Strategic investors include Nvidia and Cisco, which xAI said would support its expanding computing infrastructure.
Funding to fuel data centres and research
xAI said the fresh capital would be used to “expand its decisive compute advantage” through the construction of large-scale data centres and to support further research into advanced AI systems.
Nvidia, a key supplier of high-performance chips, already provides the hardware used to train and operate xAI’s models.
The start-up has been aggressively raising capital to keep pace in a highly competitive AI sector dominated by larger and more established rivals such as OpenAI, the maker of ChatGPT.
In July, xAI raised $10 billion through a mix of loans and equity to fund the construction of its Colossus data centre in Memphis, Tennessee.
A month earlier, it sold $300 million of shares in a secondary offering.
Controversy over Grok’s content
The funding announcement comes as scrutiny intensifies over Grok’s output.
In recent weeks, the chatbot’s image generation feature has been accused of producing sexualised images of minors and adults, including non-consensual “undressing”, prompting concern from regulators and lawmakers in several countries.
UK technology secretary Liz Kendall said the content was “absolutely appalling” and urged the company to address the issue urgently.
Creating or sharing non-consensual intimate imagery or child sexual abuse material, including AI-generated content, is illegal in the UK.
Britain’s media regulator Ofcom said it had contacted xAI to assess whether an investigation was warranted.
In France, ministers reported Grok’s output to prosecutors and referred the case to media regulators to assess potential breaches of the European Union’s Digital Services Act.
By contrast, lawmakers in the US, where xAI is headquartered, have so far been relatively quiet.
xAI said in a statement posted on X that it takes action against illegal content, including child sexual abuse material, by removing it, permanently suspending accounts, and cooperating with law enforcement.
It added that users prompting Grok to create illegal material would face the same consequences as those who upload such content.
Integration with X and expansion plans
In March, xAI acquired social media platform X for $45 billion, bringing the two Musk-owned businesses under one umbrella.
The deal allows xAI to combine data, computing resources, and staff, while giving Grok direct access to X’s user base.
The company said it now has more than 600 million monthly active users across the two platforms.
xAI said it is training the next version of its large language model, Grok 5, and plans to launch new consumer and enterprise products.
It is also developing models to support planned expansion into gaming and robotics.
A familiar pattern amid the AI boom
This is not the first time xAI has announced major funding during a period of controversy.
Last July, a week after Grok generated antisemitic and pro-Nazi content, the company disclosed it had secured a nearly $200 million contract with the US Pentagon.
The latest funding highlights the continued surge of investor enthusiasm for artificial intelligence.
Nearly two-thirds of global venture capital funding in the first nine months of 2025 went to AI companies, according to PitchBook, reflecting a market willing to back rapid growth despite rising regulatory and ethical concerns.
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